Deck 3: Demand and Supply

Question 1

If the price of a candy bar is $1 and the price of a fast food meal is $5, then the

A) relative price of a fast food meal is 5 candy bars per fast food meal.
B) money price of a fast food meal is 1/5 of a candy bar per fast food meal.
C) money price of a candy bar is 1/5 of a fast food meal per candy bar.
D) relative price of a candy bar is 5 fast food meals per candy bar.

Answer 1

A

Question 2

The price of a DVD rental is $2.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental falls by $0.50, the relative price a downloaded movie

A) falls.
B) does not change.
C) rises.
D) might change but more information is needed.

Answer 2

C

Question 3

If the money price of hats rises and no other prices change, the
i. relative price of a hat rises
ii. opportunity cost of a hat rises

A) only i
B) only ii
C) both i and ii
D) neither i nor ii

Answer 3

only ii

Question 4

Twenty years ago a stove cost $300 and a refrigerator cost $1,500. Today a stove costs $600, while a refrigerator costs $1,800. Which of the following statements is true?

A) The money price of a refrigerator has fallen.
B) The relative price of a refrigerator has increased.
C) The relative price of stoves and refrigerators has not changed.
D) The relative price of a stove has increased.

Question 5

A relative price is the

A) difference between one money price and another.
B) ratio of one money price to another.
C) slope of the demand curve.
D) slope of the supply curve.

Question 6

The opportunity cost of good A in terms of good B is equal to the

A) money price of good A minus the money price of good B.
B) money price of good B minus the money price of good A.
C) ratio of the money price of good B to the money price of good A.
D) ratio of the money price of good A to the money price of good B.

Question 7

The opportunity cost of a hot dog in terms of hamburgers is the

A) ratio of the slope of the supply curve for hot dogs to the slope of the supply curve for hamburgers.
B) ratio of the money price of a hot dog to the money price of a hamburger.
C) money price of a hot dog minus the money price of a hamburger.
D) ratio of the slope of the demand curve for hot dogs to the slope of the demand curve for hamburgers.

Question 8

An ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice cream cone is

A) 2 cans of soda per soda, the opportunity cost of an ice cream cone.
B) $0.75, the opportunity cost of a can of soda.
C) 1/2 can of soda per ice cream cone, the opportunity cost of an ice cream cone.
D) $1.50, the opportunity cost of a can of soda.

Question 9

If the price of a hot dog is $2 and the price of a hamburger is $4, then the

A) money price of a hamburger is 2 hot dogs per hamburger.
B) money price of a hot dog is 2 hamburgers per hot dog.
C) relative price of a hot dog is 1/2 of a hamburger per hot dog.
D) relative price of a hamburger is 1/2 of a hot dog per hamburger.

Question 10

If the money price of wheat increases and no other prices change, the

A) relative price of wheat falls.
B) relative price of wheat is unaffected.
C) demand for wheat increases.
D) opportunity cost of wheat rises.

Question 11

The price of a DVD rental is $1.50 and the price of a downloaded movie is $1.00. If the price of a DVD rental increases by $0.50, the relative price a downloaded movie

A) does not change.
B) rises.
C) falls.
D) might change but more information is needed.

Question 12

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bottle of soda?

A) 1/3 bag of corn chips per bottle of soda
B) $3
C) 3 bags of corn chips per bottle of soda
D) 33¢

Question 13

The price of a bag of corn chips is $3, and the price of a bottle of soda is $1. What is the relative price of a bag of corn chips?

A) 3 bottles of soda per bag of corn chips
B) $3
C) 1/3 bottle of soda per bag of corn chips
D) 33¢

Question 14

The relative price of a good is

A) an opportunity cost.
B) equal to the price of that good divided by the quantity demanded of the good.
C) equal to the money price of a good.
D) what you get paid for babysitting your cousin.

Question 15

The opportunity cost of a good is the same as its

A) relative price.
B) price index.
C) money price.
D) none of the above

Question 16

Wants, as opposed to demands,

A) are the goods the consumer plans to acquire.
B) are the unlimited desires of the consumer
C) depend on the price.
D) are the goods the consumer has acquired.

Question 17

Suppose the price of a football is $20.00 and the price of a basketball is $10.00. The of a football is .

A) relative price; 1/2 basketball per football
B) relative price; 2 basketballs per football
C) opportunity cost; $10.00
D) opportunity cost; $20.00

Question 18

A relative price is

A) the number of dollars that must be given up in exchange for the good.
B) not an opportunity cost.
C) also called the money price.
D) the ratio of one price to another price.

Question 19

Joe pays $8,000.00 in tuition. The 8,000 dollar tuition Joe pays is an example of what economists call

A) a money price.
B) a relative price.
C) an opportunity price.
D) an indexed price.

Question 20

The money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. The relative price of a pizza is

A) $24 per pizza.
B) $12 per pizza.
C) 6 tacos per pizza.
D) 1/6 pizza per taco.

Question 21

The ʺlaw of demandʺ refers to the fact that, all other things remaining the same, when the price of a good rises

A) there is a movement down along the demand curve to a larger quantity demanded.
B) the demand curve shifts rightward.
C) there is a movement up along the demand curve to a smaller quantity demanded.
D) the demand curve shifts leftward.

Question 22

The law of demand implies that if nothing else changes, there is

A) an exponential relationship between price of a good and the quantity demanded.
B) a linear relationship between price of a good and the quantity demanded.
C) a positive relationship between the price of a good and the quantity demanded.
D) a negative relationship between the price of a good and the quantity demanded.

Question 23

The law of demand implies that demand curves

A) slope down.
B) shift rightward whenever the price rises.
C) shift leftward whenever the price rises.
D) slope up.

Question 24

The ʺlaw of demandʺ predicts that, other things being equal,

A) an increase in the price of pizza decreases the quantity of pizza demanded.
B) an increase in the price of coffee decreases the quantity of tea demanded.
C) an increase in the price of downloaded music decreases the demand for downloaded music.
D) a decrease in the price of gasoline decreases the quantity of gasoline demanded.

Question 25

The law of demand states that the quantity of a good demanded varies

A) inversely with its price.
B) directly with population.
C) inversely with the price of substitute goods.
D) directly with income.

Question 26

The price of cereal rises. As a result, people have cereal for breakfast on fewer days and eat eggs instead. This behavior is an example of

A) an increase in the quantity demanded of eggs because of the income effect.
B) a decrease in the quantity supplied of cereal because of the substitution effect.
C) a decrease in the quantity demanded of cereal because of the substitution effect.
D) an increase in the quantity supplied of eggs because of the income effect.

Question 27

The law of demand states that, other things remaining the same, the higher the price of a good, the

A) smaller is the demand for the good.
B) larger is the quantity of the good demanded..
C) smaller is the quantity of the good demanded.
D) larger is the demand for the good.

Question 28

The ʺlaw of demandʺ states that, other things remaining the same, the quantity demanded of any good is

A) positively related to its price.
B) inversely related to its price.
C) directly related to the supply of the good.
D) directly related to its price.

Question 29

As the relative price of a good falls, the substitution effect implies that people buy

A) more of that good and more of its substitutes.
B) less of that good and more of its substitutes.
C) more of that good and less of its substitutes.
D) less of that good and less of its substitutes.

Question 30

Scarcity guarantees that

A) demands will be equal to wants.
B) wants will exceed demands.
C) demands will exceed wants.
D) most demands will be satisfied.

Question 31

The quantity demanded of a good or service is the amount that

A) consumers plan to buy during a given time period at a given price.
B) is actually bought during a given time period at a given price.
C) a consumer would like to buy but might not be able to afford.
D) firms are willing to sell during a given time period at a given price.

Question 32

The ʺlaw of demandʺ states that changes in

A) demand are inversely related to changes in supply.
B) demand are related directly to changes in supply.
C) the quantity demanded of a good are inversely related to changes in its price.
D) the quantity demanded of a good are not related to changes in the quantity supplied.

Question 33

The ʺlaw of demandʺ is illustrated by a

A) rightward shift of the demand curve.
B) leftward shift of the demand curve.
C) movement along the demand curve.
D) Both answers A and B are correct.

Question 34

When the price of a pizza decreases from $12 to $10, it is definitely the case that the

A) substitution effect means people buy more pizza.
B) quantity demanded of pizza will not change.
C) income effect means people buy less pizza.
D) None of the above answers is correct.

Question 35

When graphing a demand curve for corn, we are showing the relationship between the quantity demanded of corn and the

A) substitution effect.
B) money price of corn.
C) income effect.
D) relative price of corn.

Question 36

The ʺlaw of demandʺ states that, other thing remaining the same, the higher

A) the price of a good, the smaller is the quantity demanded.
B) consumersʹ incomes, the greater is the demand.
C) the price of a good, the lower is the demand for this good.
D) the price of a good, the higher is the quantity demanded.

Question 37

Which of the following is consistent with the law of demand?

A) A decrease in the price of a gallon of milk causes a decrease in the quantity of milk demanded.
B) An increase in the price of a DVD causes an increase in the quantity of DVDs demanded.
C) An increase in the price of a soda causes a decrease in the quantity of soda demanded.
D) A decrease in the price of juice causes no change in the quantity of juice demanded.

Question 38

The quantity demanded is

A) independent of consumersʹ buying plans.
B) always equal to the equilibrium quantity.
C) independent of the price of the good.
D) the amount of a good that consumers plan to purchase at a particular price.

Question 39

Demands differ from wants because

A) demands reflect a decision about which wants to satisfy and a plan to buy the good, while wants are unlimited and involve no specific plan to acquire the good.
B) wants require a plan to acquire a good but demands require no such plan.
C) wants imply a decision about which demands to satisfy, while demands involve no specific plan to acquire the good.
D) demands are unlimited, whereas wants are limited by income.

Question 40

The law of demand implies that, other things remaining the same,

A) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will decrease.
B) as the price of a cheeseburger rises, the quantity of cheeseburgers demanded will increase.
C) as the demand for cheeseburgers increases, the price of a cheeseburger will fall.
D) as income increases, the quantity of cheeseburgers demanded will increase.

Question 41

Each point on the demand curve reflects

A) the lowest-cost technology available to produce a good.
B) the highest price consumers are willing and able to pay for that particular unit of a good.
C) all the wants of a given household.
D) the highest price sellers will accept for all units they are producing.

Question 42

When the price of a good falls, the income effect for a normal good implies that people buy

A) less of that good because they cannot afford to buy all the things they previously bought.
B) more of that good because the relative price of the good has risen.
C) more of that good because they can afford to buy more of all the things they previously bought.
D) less of that good because the relative price of the good has fallen.

Question 43

Which of the following pairs of goods are most likely substitutes?

A) cola and lemon lime soda
B) lettuce and salad dressing
C) peanut butter and gasoline
D) DVDs and DVD players

Question 44

When the price of a pizza decreases from $14 to $12,

A) the income effect points out that the total purchasing power of people who buy pizza increases.
B) the income effect means that the demand for pizza will not change.
C) the income effect means people buy less pizza.
D) None of the above answers is correct.

Question 45

Which of the following influences peopleʹs buying plans and does not shift the demand curve?

A) preferences
B) income
C) the price of the good
D) the prices of related goods

Question 46

A complement is a good

A) of higher quality than another good.
B) of lower quality than another good.
C) used in conjunction with another good.
D) used instead of another good.

Question 47

People buy more of good 1 when the price of good 2 rises. These goods are

A) complements.
B) normal goods.
C) inferior goods.
D) substitutes.

Question 48

What happens to the demand for Xbox games if the price of an Xbox falls?

A) The demand for Xboxes remains unchanged.
B) The demand for Xboxes increases because the price of a complement falls.
C) The demand for Xboxes decreases because the price of a substitute falls.
D) The demand for Xboxes decreases because the price of a complement falls.

Question 49

For normal goods which of the following explains why demand curves slope downward?

A) substitution effect and income effect
B) substitutes and complements
C) resources and technology
D) prices and income

Question 50

Which of the following shifts the demand curve for oranges?

A) disastrous weather that destroys about half of this yearʹs orange crop
B) great weather that produces a bumper orange crop this year
C) an increase in the price of the fuel used to transport oranges to supermarkets
D) a decrease in the price of a pound of bananas, a substitute in consumption for oranges

Question 51

Apples are a normal good, so if the price of an apple increases from 50 ¢ to 60¢, the quantity of apples demanded decrease because of

A) a change in income.
B) the substitution effect only.
C) the income effect only.
D) the substitution and income effects.

Question 52

The quantity of iPods that people plan to buy this month depends on all of the following except the

A) price of a music download from iTunes.
B) price of CD players.
C) the technology used to produce an iPod.
D) price of an iPod.

Question 53

In the market for magazines, the ʺincome effectʺ means that

A) magazines are usually purchased by people with higher than average incomes.
B) a decrease in the price of a substitute product like books will make magazine readers feel a little poorer than they were before.
C) an increase in the price of magazines will raise the relative price of magazines to books, causing magazine readers to read more books and fewer magazines.
D) an increase in the price of magazines will reduce the total purchasing power of magazine readers, making them able to afford fewer magazines.

Question 54

When the price of a normal good falls, the substitution effect leads to in the quantity purchased and the income effect leads to in the quantity purchased.

A) an increase; an increase
B) a decrease; a decrease
C) a decrease; an increase
D) an increase; a decrease

Question 55

Ham and eggs are complements. If the price of ham rises, the demand for eggs will

A) not change but there will be a movement along the demand curve for eggs.
B) decrease and the demand curve for eggs will shift leftward.
C) increase or decrease but the demand curve for ham will not change.
D) decrease and the demand curve for ham will shift rightward.

Question 56

A changes in which of the following shifts the demand curve for hamburgers?

A) an increase in the price of a hamburger
B) a fall in the price of french fries, a complement for hamburgers
C) an increase in the number of hamburger restaurants
D) an increase in the price of the meat used to produce hamburgers

Question 57

Suppose people buy more of good 1 when the price of good 2 falls. These goods are

A) normal.
B) inferior.
C) substitutes.
D) complements.

Question 58

A substitute is a good

A) of higher quality than another good.
B) of lower quality than another good.
C) that can be used in place of another good.
D) that is not used in place of another good.

Question 59

When the price of an inferior good falls, the substitution effect leads to in the quantity purchased and the income effect leads to in the quantity purchased.

A) an increase; a decrease
B) an increase; an increase
C) a decrease; an increase
D) a decrease; a decrease

Question 60

The ʺincome effectʺ in the market for aspirin means that

A) an increase in the price of aspirin will reduce the total purchasing power of aspirin takers, making them able to afford fewer aspirin.
B) a decrease in the price of a substitute good like acetaminophen will make aspirin takers feel a little poorer than they were before.
C) an increase in the price of aspirin will cause headache sufferers to look for a lower priced remedy.
D) aspirin are generally taken by people with higher than average incomes.

Question 61

Which of the following shifts the demand curve for hot dogs leftward?

A) an increase in the price of a hamburger
B) a decrease in the price of a hot dog bun
C) an increase in the price of a hot dog
D) an increase in the price of a hot dog bun

Question 62

Cupcakes and granola bars are substitutes in consumption. The price of a granola bar increases so the demand for

A) granola bars will decrease, that is, the demand curve will shift leftward.
B) granola bars will increase, that is, the demand curve will shift rightward.
C) cupcakes will decrease, that is, the demand curve will shift leftward.
D) cupcakes will increase, that is, the demand curve will shift rightward.

Question 63

Oatmeal is a normal good and cold cereal is a substitute for oatmeal. Raisins are a complement for oatmeal. Which of the following increases the demand for oatmeal?

A) a decrease in income
B) an increase in the price of cold cereal
C) a decrease in population
D) an increase in the price of raisins

Question 64

The demand curve for a normal good shifts leftward if income or the expected future price .

A) increases; falls
B) decreases; falls
C) decreases; rises
D) increases; rises

Question 65

You observe that an increase in the price of salsa decreases the demand for tortilla chips and increases the demand for potato chips. You can conclude that

A) tortilla chips and potato chips are complements.
B) salsa and tortilla chips are complements.
C) salsa and potato chips are complements.
D) salsa and tortilla chips are substitutes.

Question 66

An increase the expected future price of a good

A) decreases its demand.
B) has no effect on either its demand or its supply.
C) increases its supply.
D) increases its demand.

Question 67

Students can rent a Blu-ray movie at Campus Video for $4. As the price of Blu-ray players fall, the

A) supply of Blu-ray movies will decrease.
B) demand for Blu-ray movies will increase.
C) quantity demanded of Blu-ray movies will increase.
D) quantity supplied of Blu-ray movies will decrease.

Question 68

Which of the following increases the demand for a normal good?

A) an decrease in the price of a substitute
B) a decrease in income
C) an increase in the price of a complement
D) the price of the good is expected to increase in the future

Question 69

If consumers but not producers expect that the price of soda will rise in November, the

A) demand for soda in October will decrease.
B) demand for soda in October will increase.
C) supply of soda in October will increase.
D) supply of soda in October will decrease.

Question 70

Sweatshirts and tee-shirts are complements in consumption and the price of a sweatshirt increases. As a result, the demand for

A) tee-shirts will decrease that is, the demand curve will shift leftward.
B) sweatshirts will increase that is, the demand curve will shift rightward.
C) sweatshirts will decrease that is, the demand curve will shift leftward.
D) tee-shirts will increase that is, the demand curve will shift rightward.

Question 71

If income increases or the price of a complement falls, the

A) supply curve of a normal good shifts leftward.
B) supply curve of a normal good shifts rightward.
C) demand curve for a normal good shifts leftward.
D) demand curve for a normal good shifts rightward.

Question 72

Consumers expect that the price of a gallon of gasoline will rise next week. As a result,

A) todayʹs demand for gasoline increases.
B) next weekʹs supply of gasoline decreases.
C) todayʹs supply of gasoline increases.
D) the price of a gallon of gasoline falls today.

Question 73

If the price of product X falls and this change increases the demand for product Y, then

A) X and Y are complements.
B) Y is an inferior good.
C) X is an inferior good.
D) X and Y are substitutes.

Question 74

A decrease in the expected future price of cars

A) increases the current quantity demanded of cars, that is, there is a movement downward along the demand curve for cars.
B) decreases the current demand for cars, that is, there is a leftward shift of the demand curve for cars.
C) increases the current demand for cars, that is, there is a rightward shift of the demand curve for cars.
D) decreases the current quantity demanded of cars, that is, there is a movement upward along the demand curve for cars.

Question 75

If the price of chicken falls, then in the market for beef,

A) the demand curve for beef shifts leftward.
B) the demand curve for beef shifts rightward.
C) there is a movement downward along the demand curve for beef.
D) there is a movement upward along the demand curve for beef.

Question 76

A decrease in the price of bowling shifts the

A) demand curve for bowling balls rightward.
B) demand curve for bowling balls leftward.
C) supply curve of bowling balls leftward.
D) supply curve of bowling balls rightward.

Question 77

The observation that the demand curve for grape jelly shifts rightward every time the price of peanut butter falls means that grape jelly and peanut butter are

A) substitutes.
B) normal goods.
C) inferior goods.
D) complements.

Question 78

If the price of an Xbox player falls, then in the market for Xbox games,

A) there is a movement upward along the demand curve for Xbox games.
B) there is a movement downward along the demand curve for Xbox games.
C) the demand curve for Xbox games shifts rightward.
D) the demand curve for Xbox games shifts leftward.

Question 79

The demand for a good increases when the price of a substitute and also increases when the price of a complement .

A) falls; rises
B) falls; falls
C) rises; rises
D) rises; falls

Question 80

The price of a tomato increases and people buy more lettuce. You infer that lettuce and tomatoes are .

A) normal goods
B) complements
C) inferior goods
D) substitutes